GATA goes Chinese, thanks to Samex Mining

By Thom Calandra
CBS.marketwatch.com
Monday, March 11, 2002

SAN FRANCISCO -- Gold-timing newsletters are increasing
their recommended exposure to bullion in a move that could
prove prophetic.

The rise in recommended gold-market exposure comes after
a rocky week for gold and gold-mining shares and sharp
losses for the dollar in currency markets. Recommended
gold-market exposure rose to 54.17 percent as of the March
8 close from 37.5 percent the previous week, says Mark
Hulbert at Hulbert Financial Digest.

Hulbert, whose Virginia-based service keeps score cards on
U.S. investment newsletters, has more than 10 years of data
for 11 gold-timing newsletters that communicate electronically
with their subscribers. Their average recommended exposure
of 54 percent to gold mining stocks and mutual funds, and
the rest to cash, may speak volumes about confidence in
bullion, which this year surpassed the $300 an ounce level,
only to break some hearts by slipping as low as $287.95 last
week.

Timers believe they can outperform benchmarks such as the
Standard amp; Poor's 500 Index of stocks by timing their entry
into and exit from certain markets, primarily the stock market.
Hulbert says professionals often draw contrarian conclusions
from investment newsletters that demonstrate overly robust
signs of optimism, or pessimism.

quot;Gold has had a good run, and it looks poised to perhaps
break through $300. So, from a contrarian point of view, it is
bullish that the gold timers have not fallen over themselves to
jump on the bullish bandwagon,quot; Hulbert said Monday.

The price of spot gold rose $2 to $291.35 Monday morning.
Gold shares traded in the Philadelphia Gold and Silver Index
rebounded 3 percent after losing 7 percent last week, when
the overall stock market staged a rally.

Hulbert explained some observers might worry that gold timers
were raising market exposure to gold-related investments even
with the price of the metal dropping back. quot;That does not
bespeak a wall of worry that a sustained bull market likes to
climb,quot; Hulbert said.

Still, with tension building in the Middle East and the dollar
undergoing a rare bout of weakness, analysts are coming
round to the prospect that gold will stage a major advance
in coming weeks.

The historical range for Hulbert's gold-timer series is minus
31.25 percent on the skeptical end and 89.6 percent on the
optimistic side of the gold equation. All gold timers Hulbert
has tracked the past 10 years have beaten a quot;buy and holdquot;
strategy for the stock market. Hulbert keeps tabs on more
than 160 newsletters and 500 recommended portfolios. See
a href=http://www.hulbertdigest.comhttp://www.hulbertdigest.com/a for more.

Gold's mini-collapse last week to below $290 an ounce
came, strangely enough, as the dollar was giving up
long-held gains against the yen, euro, and other currencies.
Gold, a dollar-linked commodity, often accelerates its gains
in periods when the dollar is declining.

Some analysts said last week was an exception. The
Japanese yen's rapid 4 percent rise against the dollar thus
far this month encouraged currency speculators in Asia to
abandon their gold positions and ride the yen. Others, such
as Robert Bishop of Gold Mining Stock Report, said talk of
a resumed series of Bank of England gold auctions may have
spooked investors.

The British central bank concluded its final sale in the current
series of auctions last week without remarking on whether it
would continue the sales, which largely have depressed gold
prices since they began in May 1999. Bishop says gold prices
will surpass $300 an ounce at some point, sweeping gold
mining shares sharply higher.

quot;Market pullbacks such as the one experienced last week
are nothing more than an extended buying opportunity,quot;
Bishop said Monday from his California headquarters. quot;If
you don't believe that gold has entered a new bull market,
there's little rationale for owning any gold stocks, so this
discussion may be superfluous.quot;

Gold mining shares and gold-related mutual funds have
made investors a ton of money in the past nine months
in the United States, Canada, South Africa, and Australia.
Down under, many gold mining companies are being gobbled
up by international operators. In South Africa, unhedged
gold producers such as Harmony Gold Mining have seen
their shares, traded in Johannesburg and on Nasdaq,
double since August. The world's largest gold producer,
Newmont Mining of Denver, is up by almost a third since
August on the New York Stock Exchange.

Among mutual funds, Gabelli Gold Fund and the Tocqueville
Gold Fund have gained 20 percent and 26 percent, respectively,
since Jan. 2. In contrast, the U.S stock market, as measured
by the Samp;P 500's exchange-traded trust, has gained less than
2 percent for the year.

The key to gold mining companies' stronger operating earnings
this year, of course, is the price of the metal itself. Keep an
eye on the dollar, says Douglas J. Lomma, senior technical
analyst with Technimentals Research Group in New York City.

quot;The dollar, which has been so strong for many years even
during this current downturn, is beginning to show signs of
deteriorating, and one of the beneficiaries of this is usually
the gold market,quot; Lomma said in a new report that is
beginning to make waves in Manhattan investment circles.quot;

quot;The United States, for many years, has been a magnet for
foreign investment,quot; Lomma reasons. quot;This investment trend
may be coming to an end. Many major countries are beginning
to reinvest in their own lands once again, leaving the safety of
U.S., dollar-denominated assets.

A falling dollar, and with it higher gold prices, often signal
commodity inflation in many natural resources, including steel,
oil and even agricultural products. Lomma, charting a 22-year
quot;down-trendquot; for gold prices, is very optimistic about the
metal's strength.

quot;The current channel that originated from the spring 2001
lows has been in place for more than a year now and is in the
midst of testing a 22-year down-trend (approx $303.60) dating
pack to its historical high peak of $671.50 in September 1980,quot;
Lomma says. quot;A break above this area could certainly set in
motion a deeper rise in gold prices, thereby sparking further
appreciation in other commodities.quot;

Any sharp gains in gold's price almost certainly would mark
a rough period for stock markets around the world, even during
a span of economic growth. But a bullion rally would make
long-suffering gold investors very happy and even earn the
gold-market timers, dare I say it, gold stars.